Monday, August 6, 2012

No FBAR Penalty Exceptions for Voluntary Disclosure and Plea Bargins

What a difference one court case makes. Gone is the believe that it was almost impossible for the IRS to get the BIG FBAR penalty (of half the value of the offshore bank account for each and every unreported year). United States Court Of Appeals for The Fourth Circuit reversed a district court opinion in favor of the taxpayer.

The Government brought its action seeking to enforce civil penalties assessed against J. Bryan Williams for his failure to report his interest in two foreign bank accounts for tax year 2000, in violation of 31 U.S.C. § 5314. Following a bench trial, the district court entered judgment in favor of Williams.

The Government appealed. Because the Court of Appeals concluded that the district court clearly erred in finding that the Government failed to prove that Williams willfully violated § 5314, it reversed the non-guilty verdict.

The key evidence is the CPA’s tax organizer and the plea bargain statement.

Relevant to this appeal, Williams completed a “tax organizer” in January 2001, which had been provided to him by his accountant in connection with the preparation of his 2000 federal tax return. In response to the question in the tax organizer regarding whether Williams had “an interest in or a signature or other authority over a bank account, or other financial account in a foreign country,” Williams answered “No.” J.A. 111.

Thus, we are convinced that, at a minimum, Williams’s undisputed actions establish reckless conduct, which satisfies the proof requirement under § 5314. Safeco Ins., 551 U.S. at 57. Accordingly, we conclude that the district court clearly erred in finding that willfulness had not been established.

For the foregoing reasons, we reverse the judgment of the district court and remand this case for proceedings consistent with this opinion. REVERSED

If you have Unreported Bank Accounts, call the lawyers  at Marini & Associates, P.A. for a FREE Tax Consultation at or or Toll Free at 888-8TaxAid (888 882-9243).

For more on this go to: 4th DCA Reverses DC - Intent to Evade Taxes Does Not Makes sequent Violations of FBAR Rules Willful - Willful Blindness Does. United States v. J.Bryan Williams; No. 10-2230


  1. LeVine Richard • Shows that domestic criminal tax counsel need to coordinate with international civil tax counsel. I would be surporised if the lawyer who negotiated the allocution with DOJ had ever heard of the FBAR before he took that case.

  2. This comment has been removed by the author.


    In an unpublished opinion, the Fourth Circuit Court of Appeals in U.S. v. Williams, reversed the district court’s holding that the taxpayer’s failure to file Form TD F 90-22.1 (“FBAR”) was not willful and in so holding, gave the IRS a boost in its efforts to combat offshore noncompliance. A case out of the District Court of the Eastern District of Virginia, Williams had been one of the few sources of precedent for how willful FBAR penalties will be enforced. The District Court held in favor of the taxpayer, finding, in part, that mere failure to check “yes” as to whether the filer held an interest in a foreign account on Schedule B of Form 1040 was insufficient, alone, to prove willfulness, and the facts and circumstances had to be examined to determine willfulness.

    The Fourth Circuit reversed the lower court’s holding as being clearly erroneous. Significantly, without examining the facts and circumstances, the Fourth Circuit found that
    the taxpayer’s signature on his return was “prima facie evidence that he knew the contents of the return.” Moreover, the Second Circuit found that the instructions to line 7a of Form 1040, which cross referenced the FBAR requirement, put the taxpayer on “inquiry notice” of the FBAR filing requirement.

    Such notice, combined with the taxpayer’s admission that he never read his tax return nor consulted the FBAR form, resulted in a “conscious effort to avoiding learning about reporting requirements... meant to conceal or mislead sources of income or other financial information... that constitutes willful blindness to the FBAR requirements.” The Fourth Circuit therefore held that the taxpayer willfully failed to file FBARs and found him liable for willful penalties under 31 USC § 5314.

    By Mitchell Goldberg